The reclassification of Israel could be of interest to IZRL ETF

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The ARK Israel Innovative Technology ETF (Cboe: IZRL) is one of the more agile exchange-traded funds providing exposure to Israeli equities and may be on the upswing as index provider MSCI reconsiders Israel’s ranking.

It has been more than a decade since Israel was promoted to market status developed by the emerging market classification, one of the rare cases where this has happened. However, Israeli equities represent a small percentage of traditional developed market benchmarks, meaning many global investors risk underweight the heavily tech country. This could change and benefit IZRL.

Today Israel resides in the Middle East category and MSCI is considering changing that status in Europe, which could be a boon to Israeli stocks, including components of the IZRL.

“MSCI is now seeking market feedback on whether investors prefer Israel in a different regional classification rather than the Middle East,” Reuters reports. “The Israeli securities regulator quoted MSCI as saying it was focusing on a reallocation of Israel to Europe, which would expose the capital market to billions of dollars in possible new investments.”

The reclassification of Israel’s regional status would likely be material to the IZRL because the ARK Investment Management ETF has 30 overlapping holdings, or a 40.5% overlap by weight, with the MSCI Israel index.

“Israel lost large passive investments in emerging markets by switching to a developed one more than a decade ago, when it went from more than 3% in the emerging markets index to less than 0.5% in the developed one, and daily volumes trade in Tel Aviv has not yet fully recovered, “according to Reuters.

The $ 235.3 million IZRL follows Israel’s ARK Innovation Index, “designed to track the price movements of Israeli publicly traded companies whose major trading operations are causing disruptive innovations in the genomics, health care sectors. , biotechnology, industry, manufacturing, Internet or information technology, ”according to ARK.

Experts believe that if Israeli stocks move into the European region, the move could fuel more inflows from foreign investors. This could provide significant benefits to IZRL member companies.

At the end of the third quarter, IZRL holds 77 stocks, 77% of which are from the technology and healthcare sectors, confirming that the ARK ETF is an accurate representation of Israel’s growing technology and innovation economy.

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The views and predictions expressed herein are solely those of Tom Lydon and may not come true. The information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.

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